Title Insurance – What Is It?

     Title Insurance is a necessary part of getting a mortgage. Owning a home is an expensive proposition. For a lot of us, it is one of the biggest financial decisions that we’ll ever make. Given this, you want to protect yourself against problems with deed and ownership records to your property. Title Insurance is used to protect you and the lender for these very problems surrounding your deed.

What is Title Insurance?
     When a new mortgage is issued by a mortgage lender, they want to know that they are lending their money on the property that you are trying to buy or refinance. To make sure of this, the lender requires a property title search on the deed. This search investigates the history of the deed as far back as in some cases 60 years. These searches are called a short search and a 60 year search. The company that ultimately guarantees the search is a title insurance company. Once the title insurance company reviews the property search and declares it okay, the will issue title insurance on the property.

     Title insurance protects against problems that arise later with the chain of custody associated with your property or deed. Very seldom are there problems with the chain of custody, but every once in a while something comes up that must be resolved.

Why Do I Need Title Insurance?
     Property in the U.S. has changed hands many times. Along the same lines, chunks of land have been subdivided, surveyed, and subdivided again and again. As such, courthouse recording errors, land survey errors, property boundary lines accidently or illegally moved, and other sorts of problems have and will continue to muddy the chain of custody records of the deeds to our homes and land.
     Another type of problem with the title to your property is that past liens can be missed. It is possible that past real estate taxes were not paid. If you are the owner of the home, and the past tax lien shows up, you may be liable for paying the lien. Also, tax liens have the first priority on your deed if you put a new mortgage on your home either through a purchase or a refinance. If a problem or claim is filed against your property, title insurance can save you from either losing your money and/or your home.

Are There Different Types of Title Insurance?
     There are two types of title insurance. One type protects the mortgage lender and one type protects you as the home owner. The lender’s policy protects the mortgage lender from losing their money if there is a problem with the deed that they mortgaged. If there is a claim that goes against what the title insurance guaranteed, the lender’s title insurance policy will cover at least a portion of the money that the lender invested in your property.
     Unfortunately, the lender’s policy will not cover any of the money that you have spent or put into your property. To protect your money you will need to get a owner’s title insurance policy. These policies are a little more expensive than what you will have to pay for with the lender’s policy. It is well worth it to purchase this extra little bit of coverage. One of the benefits of this owner’s policy is that it covers you while you own the home, whereas the lender’s policy only covers the length of time that the home has a mortgage on it.
     Some of the major title insurance companies out there are: Chicago Title, First American Title Insurance Company, Fidelity National Title, and Stewart Title.
     Congratulations with your desire to own a home or to refinance your current mortgage. Take the extra step and expense and get yourself an owner’s title insurance policy to protect your money and assets against any loss you may face with any past problems with your deed.